Managing Debt: Your Home As An Active Asset
Your home can be a source of ready cash for remodeling or emergency funds. Your bank or mortgage company can provide you details for your unique situation.
"Homeowners have a great deal of flexibility when it comes to using the equity in their home when making large purchases, home improvements, or even having money available for an emergency. The more equity they have in their home, the more flexibility they have.
There are two primary products that the State Bank of Cross Plains offers our customers. They are a Home Equity Line Of Credit (HELOC) or a Second Mortgage. Both have unique advantages for the consumer depending on their needs." Crystal Lautenbach Assistant Vice President State Bank of Cross Plains
Home Equity Line Of Credit (HELOC)
The HELOC is very useful in that it can be set up without the customer using the money immediately. Money can be drawn as needed. Draws can be made by using a check from the HELOC account or through eBank! our internet banking product. It is as easy as transferring money from one account to another with the click of a mouse. The best part is that consumers only pay interest on the amount they draw. Homeowners can pay back the full amount whenever it’s most convenient for them.
Key Elements of a HELOC:
♦ Is a revolving account
♦ Interest rates are variable (tied to prime rate)
♦ Interest only payments
♦ Paying back the principal is at the homeowner’s discretion (often in lump sum paybacks)
*Assumes prime rate of 5.00%
†Interest only
Second Mortgage
Second mortgages are an excellent tool for consolidating debts, such as credit cards. Debts such as auto loans, contractor loans or any other bills that are subject to higher interest rates can be consolidated at lower interest rates into one payment to help to reduce monthly bills. The difference between a HELOC and a second mortgage is that a HELOC is a revolving product. The money is made available when needed and has required monthly interest payments based on what is drawn. A second mortgage is paid out in full at the time the loan is taken out and the borrower makes monthly payments on principal and interest.
Key Elements of a Second Mortgage:
♦ Requires payment on structured schedule
♦ Up to a 15 year repayment term
♦ Reassessed after a term of three, four or five years to adjust interest rate—payback window stays the same
*Rate is fixed for 3 years
†Based on 15 year repayment term
